Who Will NY AG Schneiderman Sue Next?

Eric Schneiderman, the New York State Attorney General, has made it abundantly clear that the lawsuit he filed against JPMorgan Chase over mortgage-backed securities issued by Bear Stearns is just the beginning. There will be more lawsuits coming.

Schneiderman’s suit cites the Office of Comptroller of the Currency’s “Ten Worst of the Ten Worst” study of the worst mortgage originators in the worst cities—just like the FHFA did.

NY AG Sues JPMorgan Over Bear Stearns

CNBC's Scott Cohn and Eric Schneiderman, attorney general of New York, discuss which Wall Street firms are bracing themselves for a possible lawsuit from the New York attorney general.

Schneiderman says JPMorgan ignored the work of third-party due diligence companies, which was also a claim that the FHFA made. And Schneiderman actually cites the FHFA’s own sampling of mortgages to determine the quality of the pools—or, rather, the lack of quality.

After the FHFA lawsuits were filed last year, Felix Salmon and Nick Rizzo at Reuters scored them and produced a half-joking league table of banks. JPMorgan topped the list.

But that was actually a bit misleading. The reason JPMorgan beat out Bank of America is that the claims against Bank of America, Countrywide and Merrill Lynch were broken into three different lawsuits. Combined Bank of America would have taken the “lead” in the table.

I would not expect all 17 of the banks sued by the FHFA to also be hit with Schneiderman lawsuits. Most likely, only the worst of the bunch will be sued. One way of determining who “the worst” might be would be to draw up a list of which firms the FHFA sued for punitive damages.